Does Venture Capital Concentration Favor Business Formation?

Nearly 60\% of the money raised in venture capital financing rounds in the U.S. comes from investors in the top decile by money invested. Despite several advantages that these investors enjoy, they are remarkably less efficient in financing successful ventures, obtaining fewer IPOs and acquisitions as venture outcomes per dollar invested. This result holds after controlling for several investment and portfolio characteristics like size, investment stage, pre- and post-money valuations, and other characteristics impacting comparability across investment portfolios. My results highlight the inefficiency costs associated with capital concentration and the disproportionate role that average-size investors have in financing successful ventures